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Why Black Friday 2014 Was a Failure for Retailers

After weeks of advertisements and promotions about this year’s Black Friday, it turns out that Thanksgiving Day, Black Friday and the overall long weekend were disappointing for United States retailers, says a report released by the National Retail Federation (NRF) on Monday.

The report showed that there were 1.8 million fewer customers shopping on Thanksgiving Day compared to the same time last year. Additionally, there were 5.1 million fewer shoppers on Black Friday, which represented a steep seven percent decline from a year ago. Throughout the entire four-day long weekend, there was an overall drop of five percent.

It was estimated that total spending for the four-day weekend was down 11 percent to a total of $50.9 billion, compared to the $57.4 billion from 2013. According to the retail group, shoppers doled out an average $380.95, a significant 6.4 percent decline.

Businesses and analysts are dismissing the report, citing a different study conducted by ShopperTrak, which found Thanksgiving foot traffic actually increased 27 percent from a year ago. The primary difference between the two organizations is that the NRF uses data from consumers, while ShopperTrak accumulates the data from retailers.

Nevertheless, industry leaders are pointing the fall in sales to two things: online shopping and the constant Black Friday deals.

Data originating from comScore discovered that online sales surpassed $1 billion on Thanksgiving and exceeded $1.5 billion on Black Friday, a considerable 32 and 26 percent respective growth. This means that instead of wasting time outside in the cold, shoppers are heading to their computers and mobile devices to take advantage of the discounts offered by merchants on the final Thursday and Friday of November. It should be noted, however, that the average amount shoppers spent was $159.55, a substantial 10.2 percent decline from last year.

In addition, retailers are now offering week- and month-long Black Friday promotions. Instead of having 25 percent discounts on their products on one or two days, stores began early and are continuing these sales moving forward until Christmas. Why would a customer then want to wake up early on Thanksgiving when they can strike the same deal on a Tuesday afternoon?

Despite the excuses the retail industry is making, there is one important point that is being omitted from the conversation: the consuming public is just too broke to be spending their money on frivolous items, such as 50" HD LED Polaroid televisions, $50 tablets and $5 toasters.

For instance, Brad Anderson, former Best Buy CEO, told CNBC that customers still feel constrained financially, which means that this holiday season could be a lackluster one, though the NRF earlier reported a 4.1 percent projected increase in Christmas shopping this year.

Meanwhile, Macy’s CFO Karen Hoguettold analysts and investors in a conference call that consumers had much greater priorities than clothing, housewares and other household items. "Shoppers are spending more of their disposable dollars on categories we don’t sell, like cars, healthcare, electronics, and home improvement," Hoguet said.

The unstable labour market is another contributing factor to a weak Black Friday, says Lindsey Piegza, chief economist at Sterne Agee. With millions of people unemployed, underemployed or working part-time, why would they be shopping on unnecessary items?

"With uncertainty lingering and patience wearing thin after five-plus years of still lackluster wage growth, consumers are increasing saving for the future, hedging against a continuation of ’more of the same,’" Piegza wrote. "Thus, for many, extra savings at the pump as a result of lower gas prices are simply being stored away to help supplement spending needs in the future, ramping up savings, not spending."

Although Great Britain apparently seems to have imported the madness of Black Friday, the Americans may be pardoning themselves from this decades-old tradition when retailers finally hit black. The question must be asked: is this the end of Black (eye) Friday?